Overuse of Credit Cards

According to the Federal Reserve Bank report, 40 percent of the American families spend more than they earn or overuse credit cards. In other words, almost half of the American families overuse credit cards but we don't want to be known as a deadbeat among creditors and lenders. In fact few people intentionally set out to accumulate so much debt that it becomes virtually impossible for them to eventually pay it off and get back on their feet financially. Nonetheless, every year millions of people find themselves experiencing dire financial problems. The issue of overuse of credit cards primarily among Americans and also others can certainly be remedied.

In 2008 alone there was a dramatic growth in the number of people that faced credit and financial woes resulting from overuse of credit cards. A number of reasons such as generally poor economy, problems with the stock market, the troubled real estate market, fluctuating gas prices, nation-wide inflation could be attributed to their financial problem. However, there is more to credit card woes than these factors noted above. In brief, carelessness in managing personal finances and credits as well as lack of financial knowledge can be attributed to as the strong reasons for peoples' mismanagement of credit cards. However, this is not to discount certain reasons that can put us in dire financial straits and yet we have hardly any control over them. These include medical emergency and getting laid off from a job. These circumstances often result in sudden loss or dramatic reduction in income and inability to pay one's bills and cover living expenses.

However, what is undeniably true is that a lot of people simply mismanage their finances; they can't control their spending habits and choose to live beyond their financial means by over utilizing their credit cards until they are maxed out. Difficult financial times impact the use or over use of credit cards in America. According to the data from the U.S. Census bureau, the number of credit card holders in America has been growing over the years from 159 million credit card holders in 2000 to 173 million in 2006 and the number is projected to grow to 181 million Americans by 2010. These same Americans own approximately 1.5 billion cards - an average of nine credit cards per credit card holder. As of June 2008 revolving consumer credit reached a record $956.9 billion and was growing by 0.4 percent per annum as reported by CardTrak.com

Three types of problems have been identified with consumer indebtedness. One problem concerns perverse incentives facing an over indebted consumer. The debtor has less incentive to earn extra income and remain a productive member of society for any gains will accrue to the creditor without removing the burdens of indebtedness. A second problem is hardship. The indebted consumer is unlikely to devote enough income to satisfy the necessities of life. The frequent interaction between creditors seeking payment and debtors in default can be psychologically harassing and cause dramatic decline in quality of life. A third problem concerns economic insecurity as an over indebted consumer has no access to additional credit. In an unforeseen eventuality such as illness or unemployment, the consumer will have no place to turn for help resulting in hardship. This insecurity lowers the quality of life.

Whatever the reason for poor credit rating and consequent financial woes, the following steps show how the situation of financial trap can be remedied:

(a) Analyze your credit rating and financial situation so that you know where you stand.

(b) Develop a comprehensive plan to fix the problem.

(c) Begin paying your bills on time and paying off past due accounts

(d) In the months and years ahead stick to your plan to insure a positive outcome.

(e) Learn how to prevent a similar situation from happening again and take the necessary financial planning and budgeting steps to insure you remain financially stable in future.

Analyzing the situation of indebtedness purely in theological and spiritual terms debts are produced by thoughts of lack, impatient desire, and covetousness. A thought of debt will produce debt. As long as we believe in debt, we shall go into debt and accumulate the burdens that follow this thought. Thoughts of abundance on the other hand will bring abundance to meet every obligation. Psychologically, positive thoughts are known to mould the personality of an individual in a more desirable fashion. Therefore, it is quite possible that an indebted person is full of negativities - cursing his fate, the world, the credit card companies. If an indebted individual orients his thoughts in positive direction, he will be motivated to clear debts and create wealth thereby addressing the problem of indebtedness.

However, it must be said that while overuse of credit cards is a major reason for bankruptcy, the blame lies not just on the credit card holders but the credit card agencies as well that push credit cards to ignorant consumers including college students. The government must by law make credit and debt management lessons compulsory for every one above the legal age of majority. The companies indulging in reckless credit card marketing bordering on illegitimacy must be punished.